Delay in dropping petrol prices costing Kiwis $15m

Tuesday, 11 June 2024

Commerce Commission’s latest analysis showed retailers are quick to put fuel prices up but much slower to bring them down.

The delay is costing motorists around $15 million a year.

Commissioner Bryan Chapple called it ‘rockets and feather’.

The latest fuel monitoring data analysis from the Commerce Commission showed retailers are quick to put fuel prices up but much slower when bringing them down.

Commissioner Bryan Chapple said Kiwi motorists often pay more for fuel for “longer than they should – due to this lopsided, or asymmetric, pricing known as ‘rockets and feathers”.

“We can see clear evidence showing that fuel companies maintain temporarily higher margins after a decrease in their costs, lasting up to two weeks – at great expense to Kiwi motorists.

“Our findings suggest that petrol prices shoot up at the pump in response to increased costs, but there is a noticeable lag in retail prices being lowered in response to decreases in underlying costs,” Chapple said.

The Commission estimated that if fuel companies dropped prices as quickly as they increased them when costs changed, motorists would benefit by around $15 million a year.

Chapple said the findings were timely with the upcoming removal of the Auckland Regional Fuel Tax at the end of June, and the Commission has clear expectations that fuel companies will promptly pass the benefit of this reduced tax through to consumers.

Fuel delivered to the Auckland region from July 1 will be cheaper by 11.5 cents per litre but Chapple said if fuel companies don’t reflect this promptly Aucklanders could be over-paying by nearly $1 million “in the first week alone”.

“In a healthy and competitive fuel market, we expect to see changes in underlying costs fully passed through into retail prices promptly.”

The Commission would be keeping a close watch on the pricing tactics and “pass-through of cost changes” by fuel companies.